Saving Jobs in Hard Times

Is there a way to protect some workers – younger as well as older – from job loss during economic downturns? Some might be helped during the next recession if more employers have access to and use what is known as short-time compensation or work sharing. Work sharing is exactly what it sounds like – the sharing or spreading around of the available work when times are tough. Work sharing is not to be confused with job sharing, which is when two workers split the responsibilities of a single job in order to achieve a better balance between their work and nonwork lives.

Let’s say an employer plans to lay off 20 percent of the company’s employees to make ends meet. That is clearly bad news for the 20 percent, but it may also not do much for the morale of the remaining 80 percent. Instead of layoffs, however, an employer might reduce everyone’s work hours by 20 percent and achieve comparable savings. If state law allows it, work sharers who are eligible for unemployment insurance can receive prorated benefits to offset some of the lost wages. Most states also require employers to continue to provide health and pension benefits to work sharers.

While workers on work share who would not have been laid off also experience a reduction in earnings, losses should be temporary, and unemployment benefits make up for some of them. Work sharing spreads the burden of a downturn more evenly across more workers than layoffs do.

Work-share programs are not as common in the United States as they are in some countries. Germany, for example, which has used work sharing extensively according to a recent publication from the International Labor Organization, weathered the recession seeing far less impact on its unemployment rate than the U.S. did. A great deal of credit for this outcome has been attributed to the country’s work-share program.

Work sharing requires amending state unemployment insurance laws, but once that has been done, a program can be easy to implement. The decision to implement work sharing is up to an employer. Work sharing won’t work for all types of jobs and, by itself, will not keep all firms from going under – some just might not survive a slowdown. However, in the last recession, some states found that work sharing did help save jobs – an estimated 166,000 in 2009 alone, as reported by the Center for Law and Social Policy and the National Employment Law. Admittedly, this was a small percentage of the total number of job losers that year, but for those whose jobs were saved, work sharing “worked.”

Congress has made nearly $100 million in grants available to implement or improve work-sharing programs in the states. At last count, 26 U.S. states had work-sharing legislation in place, up from 17 at the height of the Great Recession. A timely expansion to other states of legislation that permits the payment of prorated unemployment benefits to work sharers could find those states better prepared to weather the next downturn, which they are likely to have to do eventually.

Sara E. Rix, Ph.D., is a senior strategic policy adviser with the Economics Team of the AARP Public Policy Institute. She has written and spoken extensively on older workers, an aging society and aging issues for more than 30 years.